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Comparing willingness-to-pay and subjective well-being in the context of non-market goods

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  • Paul Dolan
  • Robert Metcalf
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    Abstract

    In order to value non-market goods, economists estimate individuals’ willingness to pay (WTP) for these goods using revealed or stated preference methods. We compare these conventional approaches with subjective well-being (SWB), which is based on individuals’ ratings of their happiness or life satisfaction rather than on their preferences. In the context of a quasi- experiment in urban regeneration, we find that monetary estimates from SWB data are significantly higher than from revealed and stated preference data. Stigma in revealed preferences, mental accounting in stated preferences and unspecified duration in SWB ratings might explain some of the difference between the valuation methods.

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    File URL: http://eprints.lse.ac.uk/28504/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 28504.

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    Length: 45 pages
    Date of creation: Oct 2008
    Date of revision:
    Handle: RePEc:ehl:lserod:28504

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    Keywords: willingness to pay; preferences; life satisfaction; subjective well-being; nonmarket goods;

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    Cited by:
    1. Powdthavee, Nattavudh & Stutzer, Alois, 2014. "Economic Approaches to Understanding Change in Happiness," IZA Discussion Papers 8131, Institute for the Study of Labor (IZA).
    2. Angus Deaton & Jane Fortson & Robert Tortora, 2008. "Life (evaluation), HIV/AIDS, and death in Africa," Working Papers 1121, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..

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